Fundraising for Alterra IOS Venture III was completed within eight months, well ahead of the average time managers are in the market raising their funds.
Alterra Property Group’s latest fund has closed oversubscribed, with international investors providing capital for the first time, PERE has learned. The closing demonstrates demand for industrial outdoor storage continues to flourish.
The Philadelphia-based manager’s Alterra IOS Venture III was closed this week at $925 million, well beyond its original target of $750 million and hard-cap of $850 million, according to the firm. Park Madison Partners served as the exclusive placement agent. Its predecessor closed at $524 million, according to PERE data.
“Sometimes you have a product offering that the market is overly receptive to,” said Leo Addimando, chief executive of Alterra. “Within industrial, [investors] are seeking a little bit of diversification away from potentially just more and more big box warehousing – and they’re seeking more niche strategies.”
However, he added that while industrial outdoor storage is considered niche the firm estimates the value of the market to be approximately $200 billion, about 10 perfect of the value of the overall industrial market in the US.
Fundraising for the fund took eight months, notably quicker than today’s fundraising average time in market for vehicles in the sector.
“We launched in January of 2023, which was a very difficult time to raise capital in the real estate world and alternatives in general,” said Alterra chief investment officer Matthew Pfeiffer. “We were able to secure a number of meetings from a wide range of investors. The interest that we’ve been hearing in what we were doing was pretty high relative to the larger market.”
The limited partners in the fund were a mix of public and private pensions, endowments and foundations, sovereign wealth funds, asset managers, family offices and high-net-worth individuals. Three investors from outside the US committed capital to the firm for the first time since it launched the series in 2016.
“This particular strategy within US real estate has now become a bit more understood and sought after, again, not just by the US institutional investors, but international institutional investors,” Addimando said.
The focus for the series is to acquire infill properties in the US and Canada. The firm has completely deployed the capital from Alterra IOS Venture II, bringing Alterra to approximately $3 billion in assets under management.
Addimando added that access to outdoor storage for institutions and pensions funds can challenging given the size of typical individual deals. These are often $10 million or smaller, so a manager is required to aggregate them. “There are only so many managers in the space that have the institutional pedigree and a team already built,” he said.
Typically, IOS refers to land zoned for industrial use where a tenant would have outdoor storage requirements, such as vehicles, equipment or containers. So far there has been little institutional investment in the industrial sub-sector and Pfeiffer said that shortage, as well as limited available data, meant the market was fragmented and opaque.
Other firms are seeing similar success with the asset class. Last month, Catalyst Investment Partners beat the fundraising target for its second fund for industrial outdoor storage, closing Catalyst IOS Fund II at $186.9 million – above the intended target of $150 million.
Last year, Quilvest Capital Partners Axis IOS launched a joint venture with the view of acquiring and operating an approximately $500 million portfolio of industrial outdoor storage properties in the US.
By Miriam Hall, PERE News
